Congress Plans Next Small-Business Aid Package

Summary

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WSJ Your Money Briefing – Episode Summary

Episode Title: Congress Plans Next Small-Business Aid Package
Date: December 15, 2020
Host: J.R. Whalen, The Wall Street Journal
Guest: Amera Omokwe, WSJ Economics Reporter

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Overview

This episode centers on the evolving negotiations in Congress over a new coronavirus relief package targeted at small businesses. The discussion explores how the new package aims to fix shortcomings from the earlier Paycheck Protection Program (PPP) by offering more targeted support, particularly to the smallest and hardest-hit businesses. WSJ economics reporter Amera Omokwe provides insights on the likely structure of the new aid, why certain industries need specialized assistance, and efforts to reach underserved business communities.

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Key Discussion Points and Insights

1. The Need for Targeted Small-Business Aid

• [00:35-01:47]
  • Unlike early pandemic relief, which broadly distributed funds based on payroll size, the new package focuses on smaller businesses demonstrably hurt by the downturn.
  • Many small businesses, especially in-person industries, report ongoing hardship and demand quicker, more flexible aid.
  • Amera Omokwe: "Small businesses are really saying, we need this aid and we need it now." (02:44)

2. Congressional Negotiations and Bipartisan Agreement

• [02:45-03:24]
  • Aid negotiations are fluid but there is strong bipartisan consensus on the need to help small businesses.
  • The current bipartisan proposal earmarks around $300 billion specifically for small business support.
  • The new framework aims to target the smallest firms and those able to demonstrate clear pandemic-related revenue losses.

3. Proposed Changes to Paycheck Protection Program (PPP)

• [03:24-04:47]
  • To qualify for a second PPP loan:
    • Companies must have 300 or fewer employees.
    • They must show a revenue loss from 2020.
  • This shift is designed to prevent the issues from the first PPP round, in which some larger firms benefited due to expedited, minimal paperwork requirements.
  • Amera Omokwe: "Congress is really trying...to avoid some of the criticism that dogged the paycheck protection program early on by making it much more targeted." (04:32)

4. Industry-Specific Concerns

• [04:47-05:56]
  • Payroll-based aid formulas failed sectors like restaurants and live events, where operating capacity is a bigger constraint than payroll size.
  • These industries are advocating for relief not tied solely to payroll, but to reduced operations and modified business models (e.g., takeout dining).
  • Amera Omokwe: "That's why some industries are really pushing for Congress to give them dedicated funding that really is tailored to their specific situation." (05:43)

5. Addressing Aid Gaps for Minority-Owned Businesses

• [05:56-06:41]
  • The earlier PPP rollout left many minority-owned businesses without funds due to weaker banking relationships.
  • The new proposal sets aside funds for community lenders (like Community Development Financial Institutions) from the outset—aiming to better reach underserved communities.
  • Amera Omokwe: "Community lenders...are seen as key for getting funding into minority communities and other communities that tend to be underserved by traditional banks and larger financial institutions." (06:20)

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Notable Quotes and Memorable Moments

• Amera Omokwe:
  • "Small businesses are really saying, we need this aid and we need it now." (02:44)
  • "Congress is really trying...to avoid some of the criticism that dogged the paycheck protection program early on by making it much more targeted." (04:32)
  • "That's why some industries are really pushing for Congress to give them dedicated funding that really is tailored to their specific situation." (05:43)
  • "Community lenders...are seen as key for getting funding into minority communities and other communities that tend to be underserved by traditional banks and larger financial institutions." (06:20)

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Timestamps for Important Segments

• 00:35 – Introduction to the episode’s focus: new aid package for small businesses.
• 01:10 – Challenges faced by smallest businesses in previous aid rounds.
• 02:44 – Small business urgency for new relief.
• 03:09 – Congressional status: $300 billion proposal.
• 03:27 – New, stricter requirements for PPP loan applicants.
• 04:47 – Issues with payroll-based aid formulas for certain industries.
• 05:56 – How the new plan aims to reach underserved minority communities.

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Conclusion

The episode provides a concise, up-to-date overview of how Congress is shaping the next round of pandemic relief to better address the pressing needs of small and minority-owned businesses. Proposed changes aim to be more equitable, more targeted, and responsive to the unique challenges presented by different industries and communities overlooked in the initial rollout.

Transcript

[A]

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[B]

Here's your money briefing for Tuesday, December 15th. I'm J.R. whelan for the Wall Street Journal. Congress is still working out the details of a new coronavirus relief package for businesses. But unlike last time, when small, medium and large businesses receive funds based on payroll costs, the package on the table now is geared towards smaller companies that can show they've been hurt by the economic downturn.

[C]

There are some industries that have said basing a loan amount on payroll doesn't really make sense for them because many businesses in those industries are still operating at much reduced capacity.

[B]

Coming up, our economics reporter Amera Omokwe will have details on how the new relief package will benefit the nation's smallest businesses. That's after the break. In the last iteration of the federal paycheck protection program. Many of the nation's smallest businesses didn't get the funding they needed because of the way payouts were calculated. That's likely to change under the new relief package now being negotiated in Congress. Our economics reporter Amera Omokwe has been following this and she's here with us with details. Amera, thanks for taking the time to be with us.

[C]

Thanks for having me.

[B]

You know, it seems like a lot of small businesses haven't been able to move much past square one during the pandemic, just when they started seeing some customers return, state and local governments put restrictions back in place. I imagine that business owners must feel the next set of relief funds can't come fast enough.

[D]

Yes, I've been talking to business owners and if you look at survey data, several, several different surveys that are out there, there are a lot of small business owners, particularly in those hard hit industries that rely on person to person

[C]

contact that say, look, we need more

[D]

aid and it shouldn't only even be in the form of loans such as in the paycheck protection program, we need

[C]

grants, we need other long term support.

[D]

And so talking to business owners, particularly at this crucial moment where state and local governments are implementing restrictions again to deal with this surge in coronavirus cases, particularly as we go into the winter months where things like outdoor dining aren't going to be much of an option. Small businesses are really saying, we need

[C]

this aid and we need it now.

[B]

So where do things stand on negotiations in Congress?

[C]

So I'm going to caveat my answer by saying that these negotiations are ongoing and seemingly ever evolving. But lawmakers generally agree on a bipartisan basis that small businesses need more aid and that they should get more aid. So there is a bipartisan proposal that is out there right now that would direct about $300 billion towards small businesses

[D]

in the next coronavirus package.

[C]

And lawmakers generally agree that this package of small business aid should be more targeted, it should target smaller firms, and firms like can demonstrate that the pandemic

[D]

has really affected them negatively.

[B]

How is the aid package being reworked to do that?

[C]

Well, so this bipartisan framework that is proposed would make it such that if a company wanted to take a second loan under the paycheck protection program, which was the main way that the federal government offered aid to small businesses earlier this year, that company would have to have 300 or fewer employees and they would also have to demonstrate that they have suffered a revenue loss this year. Now, that would be a difference from sort of the first iteration of the paycheck protection program. That program was hastily designed and put together because lawmakers really wanted to get money out to businesses quickly. So applicants to the paycheck protection program, they had to provide very little paperwork. They pretty much only had to attest that they needed the money to support their ongoing operations amid economic uncertainty. And because of those relatively few requirements, we saw a lot of businesses rushing for ppp loans when the program first opened back in April. And you may remember that some well known larger companies received the loans and then there was public backlash and those companies had to return the funds. Right. And so this time around, Congress is really trying to focus and kind of avoid some of those pitfalls and avoid some of the criticism that dogged the paycheck protection program early on by making it much more targeted.

[B]

So the first relief package that Congress rolled out earmarked benefits for businesses largely based on payroll and overhead costs. But that didn't serve the needs of a lot of smaller businesses without a lot of employees or physical space. What have business owners said to Congress about that?

[C]

That really speaks to the idea of having dedicated aid for certain hard hit industries like the restaurant industry and like the live event industry, because a paycheck protection program loan amount was based on a business's monthly average payrol. And industries like restaurants and live events have said, look, that's not a logical formula for us because we're operating at much reduced capacity. We're not able to bring back workers at the levels that we had prior to the pandemic.

[D]

So we really need aid that is

[C]

not tied to payroll or retaining workers, but tied to not being able to operate at full capacity, tied to wanting to reopen, maybe with much modified conditions like doing takeout and things like that. And so that's why some industries are really pushing for Congress to give them dedicated funding that really is tailored to their specific situation.

[B]

Another issue we saw earlier in the year was that there were businesses in minority neighborhoods that didn't have tight relationships with banks and they struggled to get funding the first time around. Is that being addressed?

[C]

One thing that the bipartisan framework proposes is having set aside funding for community lenders right at the onset of any reopening of the paycheck protection program. And community lenders, such as community development financial institutions are seen as key for getting funding into minority communities and other communities that tend to be underserved by traditional banks and larger financial institutions. Now, that would also be a difference from the first iteration of the paycheck protection program because community lenders didn't get sort of set aside dedicated funding until the program had been open for some time.

[B]

All right, that's Wall Street Journal reporter Amera Omokwe. Amera, thanks for coming on the show.

[C]

Thank you.

[B]

And that's your Money briefing. I'm J.R. whalen for the Wall Street Journal.

[E]

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[F]

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[E]

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[F]

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[G]

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